Free Amazon TV? Advertisers Shut Out of Netflix Eye a New Option

UPDATE: Amazon Says It's Not Happening

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An Amazon Prime pilot sponsored by Geico. Amazon may be about to give advertisers a lot more premium inventory.
An Amazon Prime pilot sponsored by Geico. Amazon may be about to give advertisers a lot more premium inventory.

UPDATE: An Amazon spokeswoman responded after this article was posted to deny that a free streaming service was in the works. "We have a video advertising business that currently offers programs like First Episode Free and ads associated with movie and game trailers," she said in an email, "and we're often experimenting with new things, but we have no plans to offer a free streaming media service."

Amazon has been ramping up its ad-supported video efforts over the last six months. Now we may know why.

Amazon is working on ad-supported TV service that will be free to consumers, according to a report Thursday afternoon by The Wall Street Journal, which said its debut could happen "in the coming months."

An Amazon spokeswoman did not immediately respond to a request for comment.

If true, an Amazon ad-supported video service would likely be welcomed by marketers, potentially providing a potential challenge to YouTube, which dominates free video viewing online, or Netflix, where CEO Reed Hastings has said the company has no plans to allow ads. Influential venture capitalist Mark Suster has already called Amazon "the biggest threat to YouTube." The planned service would also offer music videos, according to two people who spoke to the Journal.

If the programming on the service is similar to the TV shows and TV-quality original programming available on Amazon's subscription-based Prime Instant Video, advertisers would get new access to premium, TV-style streaming content.

"Amazon's data is highly interesting for advertisers in a lot of product categories (ie, every category they sell) and that is likely to be enough for Amazon when it comes to selling a lot of their ad inventory," Forrester analyst Jim Nail wrote Thursday. "And unlike YouTube, there is no content on Amazon that advertisers would feel uncomfortable with their ad appearing adjacent to."

"One question will be if Amazon is willing or able to talk in traditional ratings language to go after the core TV buyers and the big brand campaigns," he added. "If so, Amazon could probably show impressive GRP, reach, and frequency numbers."

In some ways an ad-supported, free-to-viewers streaming TV service would be a step back into TV history. Many media companies today envy TV networks' dual revenue streams: one from advertisers and one from cable and satellite distributors. Amazon's service would be like going back to the pre-cable days, when ad revenue was all TV programmers had.

If that sounds like a lot of pressure to put on marketers, keep in mind that Amazon is not as focused as TV networks and most media companies on near-term profit margins.

Expanding ad ambitions

In October Ad Age reported that Amazon had approached a number of YouTube networks about distributing their short-form shows on Amazon's video service, but it was not clear whether those videos would be ad-supported, available for a la carte purchase or streamed through the company's subscription-based Prime Instant Video service.

Amazon has been somewhat quietly assembling a wide-ranging advertising business over the past several years, one that eMarketer has estimated generates $707.7 million in annual revenue. After starting with display ads running on Amazon owned-and-operated sites, the e-commerce giant has branched into ads appearing in third-party mobile apps and more recently video advertising.

Amazon introduced video ads on its product search pages in September as a way for merchants to promote products to the site's shoppers.

Amazon's most significant ad-supported video foray came last month when it began to run ads against actual video content. The company aired pre-roll ads against pilot episodes of potential original series to air on Prime Instant Video and had signed on Geico as the exclusive sponsor.

"We're testing and learning," Amazon VP-global advertising sales Lisa Utzschneider said in February. "It's early days, and we're looking at all different video formats. We're focused on creating a great experience for our customers." She declined then to say whether the company was using the ad-supported pilot program as a test for an official ad-supported video service.

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